Even if they don’t buy a fixer-upper, most people will end up making some repairs to a new home.
According to a recent report by Real Estate Witch, about 95% of homeowners said they plan to tackle a major home improvement project in the next five years. However, only 50% stated that they could currently afford it.
They’re also likely to spend more than they originally anticipated. The average homeowner spent $3,890 on renovations and remodeling in the past year alone, according to the report.
In some cases, they may get that money back when it’s time to sell, but not all home renovations deliver the same return on investment.
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Overall, homeowners are only getting a 60% return on their renovation investments, according to the recently released 2023 Cost vs. Value report from Zonda Media, a real estate market research and analytics firm.
Contrary to what many people think, most projects that offer the greatest returns in resale value relate to curb appeal rather than more glamorous kitchen and bathroom remodels.
“You have to throw away everything you watch on HGTV,” said Todd Tomalak, director of building product research at Zonda.
Only a few projects can even be 100% profitable, e.g. B. converting a HVAC system to electric, replacing garage doors, installing stone facing and upgrading to a steel front door.
While a small kitchen makeover — like painting and updating the backsplash — yielded high returns, major kitchen and bathroom renovations didn’t, the Zonda survey found.
With high house prices and a tight supply of properties for sale, more and more people are choosing to renovate their current home rather than looking for something new, according to Tomalak.
Do your homework before starting any home project
To get the most bang for your buck, talk to a realtor in your area about specific renovations that could add value to your home and which ones to skip, advised Sophia Bera Daigle, CEO and founder of Gen Y Planning, a financial planning firm for millennials.
Always get competitive bids for any project and add 10% as a “buffer,” she said, as additional costs “are likely to arise.”
If you are planning to finance a project, consider whether you can get a home equity loan or line of credit, and consider the interest rate and potential monthly payment. “Make sure you can work those monthly payments into your budget before you start,” Bera Daigle said.
It may make more sense to delay a major renovation so you can save money, reduce debt and see if interest rates come down, added Bera Daigle, a certified financial planner and also a member of CNBC’s Advisory Board.
Finally, consider how long you will be staying in your current home and how a renovation will affect your life, Tomalak said.
“If people move less often, the question of conversion shifts from investment to quality of life,” adds Tomalak.